Ghana’s cedi, West Africa’s worst performer against the dollar this year, may halt its decline in the second half of the year as the country gets more foreign currency to shore it up, central bank Governor Kofi Wampah said.
The currency of the world’s second-biggest cocoa producer has depreciated 4.3 percent this year against the dollar as companies increased demand for foreign exchange to pay import bills and repatriate profits, which is done in dollars, he said in an interview in Accra, the capital, on May 14.
“Our supplies of dollars are lower around this time,” said Wampah, who joined the Bank of Ghana in 1986 and was confirmed as governor last month. “Most of our inflows come in the second half.”
Ghana’s currency weakened 14 percent against the dollar in 2012 as economic growth spurred by the December 2010 start of oil exports accelerated to 7.9 percent, according to the Ghana Statistical Service. Companies boosted their demand for U.S. currency to bring goods including consumer products and motor fuel into the country, adding pressure on the cedi.
In 2012, the central bank raised Treasury-bill yields to make domestic assets more attractive and offered more debt. Borrowing costs on the benchmark 91-day debt rose 13 basis points, or 0.13 percentage point, to 22.97 percent at the May 10 auction. The yields, the second-highest after Malawi among sub-Saharan African debt tracked by Bloomberg, have held above 22 percent since June.
“The cedi will be broadly stable this year because of the policies we put in place,” Wampah said.
Cocoa Loan
The currency gained 1.9 percent against the dollar in September after the Ghana Cocoa Board signed its annual syndicated loan to pay for purchases of the chocolate ingredient from farmers. Cocobod will seek $1.2 billion for the 2013-14 harvest, Emmanuel Opoku, deputy director of research, said in an interview on May 3.
Rising demand for imports in Ghana may see the cedi weaken to 2 per dollar by the end of the year, John Awuah, chief financial officer at Ghana Commercial Bank Ltd., the country’s second-biggest lender, said on May 2. The currency was unchanged at 1.9895 per dollar by 5:35 p.m. in Accra yesterday.
Ghana may also get dollars from a second international debt sale this year, with plans to be completed as early as the end of next week, Wampah said. The country will probably seek $1 billion, two people with knowledge of the plans said last month. The West African nation became the first sub-Saharan African country outside of South Africa to sell Eurobonds with its debut in October 2007. Yields on the 8.5 percent debt due October 2017 advanced two basis points, or 0.02 percentage point, to 4.92 percent.
“We are looking at debt sustainability and see what will be comfortable,” Wampah said. “There may be the need to issue infrastructure bonds targeted at specific projects,” he said, declining to give details.
To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net
To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net
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